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Competitive Effects of Purchase-Based Targeted Advertising

Competitive Effects of Purchase-Based Targeted Advertising

Jianqiang Zhang, Weijun Zhong, Shue Mei
Copyright: © 2012 |Volume: 10 |Issue: 4 |Pages: 14
ISSN: 1539-2937|EISSN: 1539-2929|EISBN13: 9781466615007|DOI: 10.4018/jeco.2012100106
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MLA

Zhang, Jianqiang, et al. "Competitive Effects of Purchase-Based Targeted Advertising." JECO vol.10, no.4 2012: pp.71-84. http://doi.org/10.4018/jeco.2012100106

APA

Zhang, J., Zhong, W., & Mei, S. (2012). Competitive Effects of Purchase-Based Targeted Advertising. Journal of Electronic Commerce in Organizations (JECO), 10(4), 71-84. http://doi.org/10.4018/jeco.2012100106

Chicago

Zhang, Jianqiang, Weijun Zhong, and Shue Mei. "Competitive Effects of Purchase-Based Targeted Advertising," Journal of Electronic Commerce in Organizations (JECO) 10, no.4: 71-84. http://doi.org/10.4018/jeco.2012100106

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Abstract

This paper develops a two-period sales model to investigate the competitive effects of purchase-based targeted advertising. In the model, two competing firms gain consumer information during the first period sales, which allows them to target advertising based on consumer purchase history. Advertising is assumed to be persuasive in terms of consumer valuation enhancing and product differentiation increasing. The authors find that the firm’s ability to target can damage industry profits, consumer surplus, and even social welfare. The conditions under which targeted advertising is positive or negative are derived, showing that price competition is softened in the second period but intensified in the first. It is suggested that firms under competitive environments cautiously sponsor targeted advertising with appropriate contents.

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